Venezuela agribusiness report q3 2015

Q3 2015
www.bmiresearch.com

VENEZUELA
AGRIBUSINESS REPORT
INCLUDES 5-YEAR FORECASTS TO 2019

ISSN 2040-0497
Published by:BMI Research


Venezuela Agribusiness Report Q3 2015
INCLUDES 5-YEAR FORECASTS TO 2019

Part of BMI’s Industry Report & Forecasts Series
Published by: BMI Research
Copy deadline: June 2015

BMI Research
Senator House
85 Queen Victoria Street
London
EC4V 4AB
United Kingdom
Tel: +44 (0) 20 7248 0468
Fax: +44 (0) 20 7248 0467
Email:
Web:

© 2015 Business Monitor International Ltd
All rights reserved.

All information contained in this publication is
copyrighted in the name of Business Monitor
International Ltd, and as such no part of this
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DISCLAIMER
All information contained in this publication has been researched and compiled from sources believed to be accurate and reliable at the time of
publishing. However, in view of the natural scope for human and/or mechanical error, either at source or during production, Business Monitor
International Ltd accepts no liability whatsoever for any loss or damage resulting from errors, inaccuracies or omissions affecting any part of the
publication. All information is provided without warranty, and Business Monitor International Ltd makes no representation of warranty of any kind
as to the accuracy or completeness of any information hereto contained.


Venezuela Agribusiness Report Q3 2015
INCLUDES 5-YEAR FORECASTS TO 2019

Part of BMI’s Industry Report & Forecasts Series
Published by: BMI Research
Copy deadline: June 2015

BMI Research
Senator House
85 Queen Victoria Street
London

EC4V 4AB
United Kingdom
Tel: +44 (0) 20 7248 0468
Fax: +44 (0) 20 7248 0467
Email:
Web:

© 2015 Business Monitor International Ltd
All rights reserved.
All information contained in this publication is
copyrighted in the name of Business Monitor
International Ltd, and as such no part of this
publication may be reproduced, repackaged,
redistributed, resold in whole or in any part, or used
in any form or by any means graphic, electronic or
mechanical, including photocopying, recording,
taping, or by information storage or retrieval, or by
any other means, without the express written consent
of the publisher.

DISCLAIMER
All information contained in this publication has been researched and compiled from sources believed to be accurate and reliable at the time of
publishing. However, in view of the natural scope for human and/or mechanical error, either at source or during production, Business Monitor
International Ltd accepts no liability whatsoever for any loss or damage resulting from errors, inaccuracies or omissions affecting any part of the
publication. All information is provided without warranty, and Business Monitor International Ltd makes no representation of warranty of any kind
as to the accuracy or completeness of any information hereto contained.



Venezuela Agribusiness Report Q3 2015

CONTENTS
BMI Industry View ............................................................................................................... 7
SWOT .................................................................................................................................. 10
Agribusiness ........................................................................................................................................... 10
Operational Risk ..................................................................................................................................... 12

Industry Forecast .............................................................................................................. 14
Grains Outlook ....................................................................................................................................... 14
Table: Corn Production & Consumption (Venezuela 2014-2019) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Table: Wheat Production & Consumption (Venezuela 2014-2019) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Table: Corn Production & Consumption (Venezuela 2009-2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Table: Wheat Production & Consumption (Venezuela 2009-2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Livestock Outlook .................................................................................................................................... 22
Table: Beef Production & Consumption (Venezuela 2014-2019) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Table: Pork Production & Consumption (Venezuela 2014-2019) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Table: Poultry Production & Consumption (Venezuela 2014-2019) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Table: Beef Production & Consumption (Venezuela 2009-2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Table: Pork Production & Consumption (Venezuela 2009-2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Table: Poultry Production & Consumption (Venezuela 2009-2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Coffee Outlook ........................................................................................................................................ 29
Table: Coffee Production & Consumption (Venezuela 2014-2019) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Table: Coffee Production & Consumption (Venezuela 2009-2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

Commodity Strategy ......................................................................................................... 35
Upstream Analysis ............................................................................................................ 41
Americas GM Outlook .............................................................................................................................. 41
Americas Fertiliser Outlook ....................................................................................................................... 47

Downstream Analysis ....................................................................................................... 53
Food ..................................................................................................................................................... 53
Food Consumption ................................................................................................................................. 53
Table: Food Consumption Indicators - Historical Data & Forecasts (Venezuela 2012-2019) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

Confectionery ........................................................................................................................................ 54
Table: Confectionery Value/Volume Sales, Production & Trade - Historical Data & Forecasts (Venezuela 2012-2019) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

Drink .................................................................................................................................................... 56
Alcoholic Drinks .................................................................................................................................... 56
Table: Alcoholic Drinks Value/Volume Sales, Production & Trade - Historical Data & Forecasts (Venezuela 2012-2019) . . . . . . . . . . . . . . . . . . . . . . . . . 57

Soft Drinks ............................................................................................................................................ 58
Table: Soft Drinks Sales, Production & Trade - Historical Data & Forecasts (Venezuela 2012-2019) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59

Hot Drinks ............................................................................................................................................ 59
Table: Hot Drink Value/Volume Sales, Production & Trade - Historical Data & Forecasts (Venezuela 2012-2019) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60

Mass Grocery Retail ................................................................................................................................ 60

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Venezuela Agribusiness Report Q3 2015
Table: Mass Grocery Retail Sales By Format - Historical Data & Forecasts (Venezuela 2012-2019) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Table: Sales Breakdown By Retail Format Type . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61

Regional Overview ............................................................................................................ 62
Competitive Landscape .................................................................................................... 67
Table: Venezuela Agribusiness Competitive Landscape . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67

Demographic Forecast ..................................................................................................... 68
Demographic Outlook 2015 ....................................................................................................................... 68
Table: Population Headline Indicators (Venezuela 1990-2025) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Table: Key Population Ratios (Venezuela 1990-2025) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Table: Urban/Rural Population & Life Expectancy (Venezuela 1990-2025) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Table: Population By Age Group (Venezuela 1990-2025) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Table: Population By Age Group % (Venezuela 1990-2025) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71

Methodology ...................................................................................................................... 73
Industry Forecast Methodology ................................................................................................................ 73
Sector-Specific Methodology .................................................................................................................... 74

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Venezuela Agribusiness Report Q3 2015

BMI Industry View
BMI View: The operating environment for the agribusiness sector has deteriorated significantly over recent
years due to a poor macroeconomic climate, shortage of foreign currency and government mismanagement,
resulting in a dearth of agricultural inputs. Venezuela's economy will be under extreme downward pressure
in 2015 amidst a drop in international prices. The growing headwinds to the economy will weigh on
agriculture production and consumption in the coming year, and we will see most commodities see modest

if not declining growth out to 2019. Producers of agricultural goods will struggle as rising production costs
and controlled prices at farm level reduce margins.

Agribusiness Market Value
BMI Market Value By Commodity (2005-2019)
75

50

25

0
2005

2007
2006

2009
2008

2011
2010

2013e
2015f
2017f
2019f
2012
2014e
2016f

2018f

Grains market value, % of total
Livestock market value, % of total

Sugar market value, % of total

e/f = BMI estimate/forecast. Source: FAO, BMI

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Venezuela Agribusiness Report Q3 2015

Key Forecasts
■

Poultry consumption growth to 2019: 9.3% to 1.1mn tonnes. Demand for poultry is slowing down, amidst
the growing headwinds to the Venezuelan economy and consumer purchasing power.

■

Coffee production to 2018/19: decline of 1.9% to 686,800 60kg bags. The outlook for coffee production
in Venezuela remains dire, as hurdles to output expansion will remain in place over the coming years.

■

Beef production growth to 2018/19: 0.1% to 280,400 tonnes. High input costs, cheaper Mercosur

competitors and reduced domestic demand will stymie growth.

■

2015 BMI universe agribusiness market value: USD19.6bn (up 1.8% from 2014; forecast to grow
annually by 2.5% on average from 2015 to 2019).

■

2015 real GDP: contraction of 3.6% (contracted by 2.5% in 2014; forecast to grow by an annual average
of 0.2% between 2015 and 2019).

■

2015 consumer price index: 77.0% year-on-year (y-o-y) (up from 61.7% in 2014; forecast to grow
annually by 42.5% on average between 2015 and 2019).

Industry Developments

Venezuela's agricultural sector has been held back over the past decade by poorly executed control policies
and limited agricultural inputs. The country's socialist government has pegged its procurement price for
corn below the cost of production for some time, which has resulted in declining output for several years.
Control over the bolivar by the Venezuelan government and limited loan availability in the country have
also meant there is limited use of imported agricultural inputs. This has drastic implications for
Venezuelans, as the country's dependence on imports has been growing over the past ten years due to these
poor policies; imports now account for about 70% of its food supply.

The operating environment for the agribusiness sector has deteriorated significantly over recent years due to
the poor macroeconomic climate and a shortage of foreign currency. Venezuela's economy will be under
extreme downward pressure over the coming quarters, due to a confluence of factors including a poor

business environment, high inflation and lower oil prices. Some types of politically important public
spending will be bolstered by the government's attempts to consolidate its appeal ahead of the legislative
elections scheduled for the end of 2015, but the dearth of public revenue, as well as high inflation, will mute
spending growth in real terms. We forecast a real GDP contraction of 3.6% in 2015, compared to an
estimated 2.5% contraction in 2014. We expect the recession to stretch into its third year in 2016.

The already strained grains and livestock sectors in Venezuela will see their operating environment
deteriorate further in 2015 as the growing headwinds to the Venezuelan economy will weigh on meat

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Venezuela Agribusiness Report Q3 2015

production and consumption. Regarding livestock, beef and poultry output will record weak growth in the
coming years, as domestic production will be pressured by fixed output prices and high feed costs.
Although the government lifted meat prices in early 2015, local producers associations argue they are still
below production costs. The country's modern poultry industry will fare better than the beef sector, for
which the outlook is especially bleak. Meanwhile, the growing headwinds to the Venezuelan economy will
drag meat consumption growth lower in 2015.

Venezuela's grain farmers and milling sector will continue to operate in a challenging environment in the
coming years. Hurdles will include rising production costs and government control over access to foreign
exchange and therefore inputs. The recent drop in international oil prices poses further risks to the country's
foreign exchange reserves and its ability to import much-needed agricultural inputs. Corn production, a key
staple in the country, will decline. Meanwhile, the grain downstream segments, including feed
manufacturing and food production, will face mounting challenges.

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Venezuela Agribusiness Report Q3 2015

SWOT
Agribusiness
Venezuela Agribusiness SWOT

Strengths

■

Venezuela's tropical climate enables production of a diverse range of agricultural
products.

■

Venezuelan cocoa are known for their high quality. Cocoa especially is sought after by
producers of premium chocolate.

Weaknesses

■

Despite having large areas of fertile arable land, lack of investment in agriculture has
left Venezuela a major food importer.

■

High food price inflation and frequent supply shortages have dampened growth in
food consumption.

■

Price controls in place since 2003 squeeze the profits of producers and are a
disincentive to investing in increasing production.

Opportunities

■

The government has shown interest in revitalising coffee and cocoa production after
years of decline.

■

The government has introduced a number of programmes, including financing and
subsidies, to help smallholders increase production.

■

Falling oil revenue is bringing more attention to increasing agricultural production to
reduce the cost of food imports.

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Venezuela Agribusiness Report Q3 2015

Venezuela Agribusiness SWOT - Continued

Threats

■

The threat of land seizures and nationalisation inhibits investment in agriculture in
Venezuela.

■

Falls in oil prices will severely limit the amount of money the government will be able
to spend.

■

Uncertainty over the country's political and economic landscape has increased
following the death of President Hugo Chávez.

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Venezuela Agribusiness Report Q3 2015

Operational Risk
SWOT Analysis

Strengths

■

Venezuela offers a large pool of urbanised, low-skilled workers, which benefits labourintensive industries.

■

Venezuela's opposition to US foreign policy means that it is unlikely to be targeted by
international terrorist groups.

■

Moderate levels of government spending create favourable conditions for investors,
balancing the need for liquidity and fiscal austerity.

■

The availability of high speed mobile internet in urban centres makes it much easier
for businesses to communicate with employees and goods in transit.

Weaknesses

■

Venezuela's labour laws are among the most restrictive in the world, severely
reducing the flexibility with which businesses can act with regard to their workforce.

■

Venezuela's major cities have some of the highest violent crime rates in the world,
and criminality is rife in all areas, day or night.

■

Total tax rate as a percentage of commercial profits is very high at 61.1%, which is
above the regional average of 47.3%.

■

Trade procedures are hampered by trade bureaucracy, extensive shipping times, and
high costs.

Opportunities

■

Public education programmes targeting adults create opportunities for further training
and education of unskilled workers.

■

Individuals, businesses, and government agencies are investing in security equipment
and services to reduce risk to personal safety and property.

■

Venezuela joined the customs union Mercosur in 2012, which will enhance economic
integration in the region and reduce the risk of conflict.

■

Improvements in transport infrastructure will reduce the cost and time it takes to
import and export thereby increasing the efficiency of supply chains.

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Venezuela Agribusiness Report Q3 2015

SWOT Analysis - Continued

Threats

■

The brain drain of talented workers overseas will lead to a shortage of experts, and
force companies to employ foreign experts at greater cost.

■

Businesses and foreign nationals are prime targets for theft, kidnapping and robbery.
This necessitates high security expenditure, which raises operating costs.

■

There is widespread corruption throughout the government and public power is
exercised for private gain.

■

Nationalisation of the port sector has caused a decrease in investment, damaging the
sector's productivity resulting in supply chain delays.

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Venezuela Agribusiness Report Q3 2015

Industry Forecast
Grains Outlook
BMI Supply View: Venezuela is a major net importer of grain. Though production rose rapidly through the
first decade of the 21st century, consumption has also risen, fuelled by oil-driven economic growth. Corn is
Venezuela's major grain crop, with the vast majority grown in the central states of Barinas, Portuguesa and
Guárico. While the area planted to corn has risen by around 50% since the end of the 1990s, Venezuela's
agricultural sector remains relatively undeveloped, and there is still plenty of room for further expansion.
About 65% of the area planted is white corn for human consumption; the remainder is yellow corn for both
human consumption and for feed.

The operating environment for grains farming and manufacturing has deteriorated significantly over recent
years, due to the poor macroeconomic climate and shortage of foreign currency, with farmers unable to
invest in the fertilisers and machinery which would allow them to recover lost production. The grain
downstream segments, including feed manufacturing and food production, are facing mounting challenges.

We forecast corn production to decline by 1.0% year-on-year to 1.34mn tonnes in the 2014/15
season, which started in October 2014. The weather during the planting and growing season of the main
corn crop (winter) was drier than usual, leading to below-par yields. Unfavourable weather has added to the
structural difficulties that the corn farming sector is facing. Production of grains, as well as other crops, is
severely hampered by the deterioration in supply of farm equipment, as well as low quality transportation
infrastructure, seed and soil conservation.

Out to the end of our forecast period, the level of production will be highly reliant on the government's
ability to support the agricultural sector. In 2012, the government set ambitious targets to boost domestic
grain production by 70% by 2018. However, without continued support, improved production techniques
and improved profitability, much of the newly opened farmland will very likely return to fallow. In the
current climate of economic and political uncertainty we are sceptical of the government's ability to invest
scarce foreign currency in the sector to prevent further falls in output. Production will be held back by the
lack of fertiliser, low profitability hit output, shortages of technical staff and equipment, delays in financing
to farmers, inefficient production techniques and unreliable supplies of materials and agrochemicals. We
therefore expect forecast corn production to decrease by 3.7% between 2013/14 and 2018/19 to 1.3mn
tonnes.

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Venezuela Agribusiness Report Q3 2015

Wheat production in Venezuela is negligible, as the country does not have a suitable climate for growing
wheat. Venezuela is therefore reliant on imports to meet domestic demand, with the majority coming from
the US (42%) and Canada (52%). In 2011, wheat was added to the list of goods classified by the
government as essential or staple, which helps to expedite import procedures. However, importers have

faced problems related to rising international prices, limitations on accessing foreign currency and delays in
obtaining import approval.

BMI Demand View: Demand for feed corn has risen rapidly since the economic recovery began in 2004,
mainly driven by the expansion of the poultry sector. However, as purchasing power is expected to be low
in 2014, human consumption will increase faster than that of the animal feed industry as Venezuelans turn
to their cheaper staple food. Corn is a staple food in Venezuela, and corn flour is used to make arepa, a flat,
unleavened bread. Total corn consumption rose by almost 120% from 2005 to 2014, outstripping growth in
production and leading to a surge in imports from the US.

We see corn consumption growing by 3.0% y-o-y to 3.9mn tonnes in 2015, as demand for feed will recover
after the decline in 2013. In the medium term, we believe consumption will increase, as corn is one of the
cheapest foods available and the price is kept down by government price controls. Growth will, however, be
more moderate than during the previous five-year period; out to 2019 we forecast demand rising by 15.7%
on the 2014 level to take consumption to 4.4mn tonnes.

Wheat has gained in popularity since the beginning of the 21st century, as Venezuelan consumers have had
more money to spend on food. Consumption of both baked goods and pasta has been rising. Price controls
mean pasta has become far more affordable and per capita consumption has now risen to around 14kg. The
majority of pasta produced is lower grade and must be sold at a government-set price. Some high-grade
pasta is also produced that can be sold at market prices. Pasta imports increased to an estimated 28,860
tonnes in 2013, up from an average of 7,200 tonnes in 2008-2012. The expansion in production of two
major millers and pasta manufacturers is likely to lead to increased availability and higher consumption. We
see wheat demand growing by 2.0% to 1.7mn tonnes in 2015; out to 2019, we believe consumption will
grow by 14.6% on in 2014 level to 1.9mn tonnes.

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Venezuela Agribusiness Report Q3 2015

Table: Corn Production & Consumption (Venezuela 2014-2019)

Corn production, '000 tonnes
Corn production, % y-o-y
Corn consumption, '000 tonnes
Corn consumption, % y-o-y

2014e

2015f

2016f

2017f

2018f

2019f

1,350.0

1,336.5

1,333.8

1,300.0

1,300.0

1,300.0

3.8

-1.0

-0.2

-2.5

0.0

0.0

3,806.7

3,920.9

4,042.5

4,163.8

4,284.5

4,404.5

4.3

3.0

3.1

3.0

2.9

2.8

2014e

2015f

2016f

2017f

2018f

2019f

1,632.8

1,665.4

1,712.0

1,763.4

1,816.3

1,870.8

5.0

2.0

2.8

3.0

3.0

3.0

e/f = BMI estimate/forecast. Source: USDA, BMI

Table: Wheat Production & Consumption (Venezuela 2014-2019)

Wheat consumption, '000 tonnes
Wheat consumption, % y-o-y

e/f = BMI estimate/forecast. Source: USDA, BMI

Grain Sector Facing Structural Difficulties

Venezuela's agricultural sector has been held back over the past decade by poorly executed control policies
and limited agricultural inputs. The country's socialist government has for some time pegged its
procurement price for corn below the cost of production, which has resulted in declining output for several

years. The control by the Venezuelan government of the bolivar and limited loan availability in the country
has also meant there is limited use of imported agricultural inputs. This has drastic implications for
Venezuelans, as the country dependence on imports has been growing over the past ten years due to the
poor policies, and imports now account for about 70% of its food supply.

In 2014/15, the operating environment of Venezuela's grain sector will deteriorate further. Corn production,
a key staple in the country, will decline. Meanwhile, the grain downstream segments, including feed
manufacturing and food production, will face mounting challenges. We forecast corn production to decline
by 1.0% year-on-year to 1.34mn tonnes in the 2014/15 season, which started in October 2014. The weather
during the planting and growing season of the main corn crop (winter) was drier than usual, leading to
below-par yields.

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Venezuela Agribusiness Report Q3 2015

Stagnating Fundamentals
Venezuela - Corn Production ('000 tonnes), Area Harvested ('000 ha) & Yields (tonne/ha)

e/f = BMI estimate/forecast. Source: USDA, BMI

Unfavourable weather has added to the structural difficulties that the corn farming sector is facing.
Production of grains, as well as other crops, is severely hampered by the deterioration in supply of farm
equipment, as well as low quality transportation infrastructure, seed and soil conservation. Venezuela's poor
macroeconomic climate and shortage of foreign currency means farmers are unable to invest in muchneeded fertilisers and machinery. The country imports around 45% of its fertiliser consumption, including
its total potash needs and 70% of its phosphate needs. As a result, yields have been stagnant over the past
five years, compared to yield growth in other Latin American countries including Brazil, Argentina and

Colombia. Due to these structural issues and the Venezuelan government's firm opposition to using
genetically modified seeds, we believe corn yields will continue to languish. Another factor affecting
Venezuelan rice and corn production is controlled farmgate and retail prices. Both farmers and the industry
complain of low prices for their product and high cost of production, which make it difficult to operate
profitably.

Despite these difficulties, production will not decline as much as would otherwise be the case due to
government subsidies, which made up about 50% of total farmers' income in 2013. This is likely to help

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Venezuela Agribusiness Report Q3 2015

corn production remain at current levels (1.3mn tonnes) over the coming years, while we see output
growing by 21.2% between 2013/14 and 2018/19 in Colombia (to 2.1mn tonnes) and by 7.6% in Peru (to
1.85mn tonnes) over the same period.

Stagnating In Venezuela
Select Countries - Corn Yields (tonne/ha)

Source: USDA, BMI

Lack Of Foreign Currency Also Hampers Wheat Milling Sector

Venezuela does not produce any wheat but it does import it to mill domestically - this sector is
therefore also suffering from the lack of access to foreign exchange. In order to control its currency, the
government allocates a limited amount of US dollars to companies via the currency board Cencoex in order

to import raw materials including grains. This will only worsen in 2015, as the drop in oil prices in H214
will limit Venezuela's reserves and jeopardise further the country's access to foreign exchange.

Venezuela's largest private company Empresas Polar halted its production of pasta for several weeks in
April-May 2014 over delays in foreign currency allocations from the government. This highlights the

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Venezuela Agribusiness Report Q3 2015

difficulties in the wheat milling industry, plagued by poor planning and the lack of timely foreign currency
availability.

Increasing Dependence
Venezuela - Corn, Wheat & Rice Imports ('000 tonnes)

f = BMI forecast. Source: BMI, USDA

Growing Dependence On Imports

The government's aim of achieving self-sufficiency is a long way from being realised, and Venezuela is still
heavily reliant on grain imports to fuel domestic demand, both for human consumption and for the livestock
industry.

Grains imports have been steadily growing in recent years and are forecast to reach 2.6mn tonnes for corn
and 1.8mn tonnes for wheat in 2014/15. Corn and wheat imports continue to face severe delays and
problems mainly to the long waiting time for the approval of foreign currency and import permits.

However, imports of grains should continue to receive preferential treatment to expedite the import of basic
consumer goods and to maintain the livestock industry.

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Venezuela Agribusiness Report Q3 2015

America Benefiting From Growing Imports
Venezuela - Corn (LHC) & Wheat (RHC) Imports By Suppliers, 2013 (% of total volume imported)

Source: ITC, BMI

Gran Misión Agro Venezuela Fails To Deliver

Following its intention to boost grains production and reach self-sufficiency in corn, the government
launched in 2011 Gran Misión Agro Venezuela, a new programme designed to support the country's
agricultural production as part of a two-year plan for the sector. Misión Agro Venezuela was designed to
provide low-interest loans, machinery and technical assistance to the country's agricultural producers, from
small to large-scale landowners, with VEF9.9bn (USD2.3bn) committed to the programme. However, the
Gran Misión has failed to reach its objectives since the first years. Yellow and white corn reached only
around 50% of its fixed target.

Nicolás Maduro relaunched Gran Misión AgroVenezuela in January 2013 for 2013-2019. In total,
VEF7.81bn will be available for 2013, of which VEF3.0bn will be dedicated to improving farm roads.
However, we believe this renewed programme will also be a failure and forecast corn production to actually
stagnate between 2013/14 and 2018/19.

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Venezuela Agribusiness Report Q3 2015

Table: Corn Production & Consumption (Venezuela 2009-2014)

Corn production, '000 tonnes
Corn production, % y-o-y
Corn consumption, '000 tonnes
Corn consumption, % y-o-y

2009

2010

2011

2012

2013

2014e

1,800.0

1,634.0

1,300.0

1,300.0

1,300.0

1,350.0

0.0

-9.2

-20.4

0.0

0.0

3.8

3,200.0

3,400.0

3,100.0

3,850.0

3,649.8

3,806.7

18.5

6.3

-8.8

24.2

-5.2

4.3

2009

2010

2011

2012

2013

2014e

1,550.0

1,550.0

1,500.0

1,500.0

1,555.0

1,632.8

3.3

0.0

-3.2

0.0

3.7

5.0

e = BMI estimate. Source: USDA, BMI

Table: Wheat Production & Consumption (Venezuela 2009-2014)

Wheat consumption, '000 tonnes
Wheat consumption, % y-o-y

e = BMI estimate. Source: USDA, BMI

Risks To Outlook

We see some upside risks to our pessimistic outlook on the country's corn production. First, a change in the
government's procurement policy could incentivise farmers to increase plantings, and would also increase
their ability to purchase inputs. Second, an improving economic situation may increase consumption and aid
credit conditions, allowing greater input usage. Third, improved growth in the poultry sector would increase
the demand for corn and could encourage domestic corn production to increase. Finally, further devaluation
of the bolivar and declining foreign reserves could result in imports becoming too costly for the
government. This could result in a more facilitating environment for domestic corn production.

On the demand side, consumption will be reliant on the continued subsidisation of the price of staple foods
and the ability of the government to source sufficient grain supplies on the export market. If the government
allowed grain prices to rise, consumption would be hit. On the other hand, if oil prices rise faster than we
expect, a recovery in government revenues could see increased investment in agriculture and stronger-thanexpected growth in the production and consumption of grain.

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Venezuela Agribusiness Report Q3 2015

Livestock Outlook
BMI Supply View: After strong growth in the 1990s and the first few years of the 21st century,
Venezuela's livestock sector has been going through challenging times since 2005. Production has been
broadly stagnating in the country (while it grew strongly in the rest of Latin America), including in
Colombia and Brazil. Venezuela was self-sufficient in beef in 2003, but in recent years the country has
become increasingly reliant on imports to meet domestic demand. The sector is held back by a lack of
profitability due to high input costs, inflation and government price controls, along with increased
competition from imports from Brazil, Colombia and Nicaragua.

Regarding production, we believe both beef and poultry output will record weak growth in the coming
years. Domestic production will be pressured by fixed output prices and high feed costs. Although the
government lifted meat prices in early 2015, local producers associations argue they are still below
production costs. Feed costs have been increasing lately, as domestic corn production is dwindling amidst
scarce access to inputs. Meanwhile, importing feed grains is problematic as the government allocates a
limited amount of US dollars to companies to import raw materials including grains in order to control its
currency. This will only worsen in 2015, as the drop in oil prices in H214 will limit Venezuela's reserves
and jeopardise further the country's access to foreign exchange.

The country's modern poultry industry will fare better than the beef sector, for which the outlook is
especially bleak. The poultry industry is organised, vertically integrated and efficient, and producers are
constantly working to modernise and improve their production methods. Poultry production will grow by a
weak 1.8% from 2013/14 out to our forecast period in 2018/19, reaching 687,200 tonnes. Beef output will
broadly stagnate and stand at 280,400 tonnes in 2018/19.

Venezuela produces only small quantities of pork. Output has remained stable in recent years. We see
production growing slowly in the coming years, by 2.5% between 2013/14 and 20185/19 to 130,200 tonnes.

BMI Demand View: Meat consumption soared in Venezuela's boom years from 2004 to 2008. The rise in
demand was driven by a combination of strong, oil-fuelled economic growth and government price controls
making staple foodstuffs more affordable. Consumption growth was slower since 2008, due to constraints
on production (lower availability of grains). In 2014, annual per capita consumption stood at an estimated
32.7kg for poultry, 18.9kg for beef and 4.6kg for pork. While price controls have increased demand, they
have worked against investment in production and led to an increasing reliance on imports. In 2014, imports
reached an estimated 410,000 tonnes for poultry and 325,000 tonnes for beef.

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Venezuela Agribusiness Report Q3 2015

After recording more robust growth than production in recent years, consumption is now also slowing
down. We forecast poultry meat consumption to grow by a weak 1.8% annually between 2015 and 2019,
compared with the 3.4% annual growth recorded over the past five years. Meanwhile, beef demand will
even be weaker, due to the price premium it commands, and grow by 1.6% every year over our forecast
period, compared with the 2.8% annual growth seen over 2010-2014. Although moderate, the pace of
consumption growth for poultry is still faster than for pork or beef owing to the comparatively lower cost.

Pork consumption is much lower than that of poultry and beef. Consumption broadly stagnated over
2005-2014 around 134,000 tonnes. Out to 2019, we see consumption increasing by 3.4% on the 2014 level
to 147,900 tonnes, fuelled primarily by population increases.

Table: Beef Production & Consumption (Venezuela 2014-2019)

Beef & veal production, '000 tonnes

2014

2015f

2016f

2017f

2018f

2019f

280.0

271.6

273.5

276.0

277.9

280.4

-9.7

-3.0

0.7

0.9

0.7

0.9

583.0

585.9

592.4

604.2

616.9

630.2

0.5

0.5

1.1

2.0

2.1

2.2

Beef & veal production, % y-o-y
Beef & veal consumption, '000 tonnes
Beef & veal consumption, % y-o-y

f = BMI forecast. Source: USDA, BMI

Table: Pork Production & Consumption (Venezuela 2014-2019)

Pork production, '000 tonnes
Pork production, % y-o-y
Pork consumption, '000 tonnes
Pork consumption, % y-o-y

2014

2015f

2016f

2017f

2018f

2019f

127.0

127.6

128.3

128.9

129.6

130.2

0.4

0.5

0.5

0.5

0.5

0.5

143.0

143.3

144.4

145.6

146.8

147.9

0.0

0.2

0.8

0.8

0.8

0.8

f = BMI forecast. Source: USDA, BMI

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Venezuela Agribusiness Report Q3 2015

Table: Poultry Production & Consumption (Venezuela 2014-2019)

Poultry production, '000 tonnes
Poultry production, % y-o-y
Poultry consumption, '000 tonnes
Poultry consumption, % y-o-y

2014

2015f

2016f

2017f

2018f

2019f

675.0

679.7

681.1

683.1

685.2

687.2

2.3

0.7

0.2

0.3

0.3

0.3

1,010.0

1,025.2

1,040.5

1,061.3

1,082.6

1,104.2

2.0

1.5

1.5

2.0

2.0

2.0

f = BMI forecast. Source: USDA, BMI

Weak Prospects Ahead For Venezuela's Livestock Sector

The operating environment for the livestock sector has deteriorated significantly over recent years, due to
the poor macroeconomic climate and shortage of foreign currency, with producers unable to source cheap
foreign feed which would allow them to recover lost production. As with most industrial and agricultural
sectors in Venezuela, livestock production and consumption have been profoundly affected by the
interventionist policies implemented by Presidents Hugo Chavez and Nicolás Maduro. Livestock production
has been stagnating over the past 10 years, amidst strict price controls and elevated feed costs. The outlook
if even bleaker in 2015 as growing economic headwinds and shortages of meat supply will weigh on
consumption.

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